Costs update – COVENTRY, THE HUMAN RIGHTS ACT AND QOCS

It is remarkable that this issue was not considered before by the highest court if it was a point which was at least arguable. It prompts the question of whether an equivalent challenge might be mounted to any of the clutch of reforms which loosely fall under the heading of ‘Jackson’.

The most obvious candidate for consideration is the Qualified One-way Costs Shifting (‘QOCS’) system.

The Submission in Coventry

In Coventry, the paying party’s case under Article 6 and Article 1 Protocol 1 (A1P1) of the European Convention is summarised by Lord Neuberger in a passage beginning at paragraph 38 of the July 2014 judgment.

The paying party relies upon the judgments of  MGN Limited v United Kingdom (2011) 53 EHRR 5 (albeit that that case relates to Article 10 not Article 6 ECHR) and Dombo Beheer BV v Netherlands (1994) 18 EHRR 213- saying that:
‘…by virtue of section 6 of the Human Rights Act 1998 the court, as a public body, must exercise its discretion when awarding costs in accordance with the Convention, save where otherwise required by primary legislation (such as the 1990 and 1999 Acts), and that secondary legislation (such as the CPR and Practice Directions) must be disapplied where it requires otherwise.’
The paying party in Coventry contends that the quantum of the costs ordered by the lower court infringes its rights under the Convention; and thus that the court should disapply the relevant provisions of the CPR.

At paragraph 39, the arguments under A1P1 are summarised, drawing from the principle articulated by the Strasbourg court in James v United Kingdom (1986) 8 EHRR 123 at paragraph 50, in the following terms:-
‘…when someone is deprived of property, there must be “a reasonable relationship of proportionality between the means employed and the aim sought to be realised”, and that “a ‘fair balance’ …. must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights”’.

Lord Neuberger’s preliminary view as set out in July is that this takes the paying party no further than the foregoing Article 6 arguments.

Application to QOCS?

The position in a QOCS case is of course that a defendant can succeed; obtain a costs order against the claimant; but, subject to the exceptions provided for in the CPR, is unable to enforce that judgment except to the extent of any damages recovered  by the claimant.

One must not forget that the QOCS regime applies where any PI claim is incorporated as part of the claim, as per CPR 44.13(1)(a). Thus, the incorporation of a relatively minor PI element as part of a much larger claim for other damages arising from the same incident arguably gives rise to QOCS protection for the Claimant in respect of the entire claim – assuming none of the exceptions to QOCS apply. That raises the prospect of QOCS-related issues being raised outside the most familiar PI contexts – for example a dispute between neighbours where one claims that the other caused him injury.

Two points. Firstly, the prospect of running up unpredictable and potentially huge own-costs with no real prospect of recovering them from the other party might put off a party from litigating who otherwise has a good case. That – on its face – raises possible Article 6 arguments.

The second point is that the successful defendant in a QOCS case comes into possession of an asset – namely a judgment for costs. But the CPR prevents him from disposing of that asset by bringing enforcement proceedings. The property is rendered worthless in real terms by the rules. That, on the face of it, is an interference with property, which arguably engages A1P1. Unlike in Coventry it may be that the arguments under A1P1 take the paying party further in the QOCS context than Article 6.
This point is may not appeal to the majority of defendants in QOCS cases since they are insurers who are net beneficiaries from the QOCS scheme. However, given the scope of QOCS and the near-certainty that in some cases a defendant will not be an insurer or other deep-pocket defendant, costs practitioners would be well advised to bear in mind the effect of the HRA. It may be that – in contrast to Coventry and old-style CFAs– it is a point which is aired sooner than 15 years after introduction of the scheme.

William Irwin (Barrister), Temple Garden Chambers

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